This paper presents a simple model of trade in the housing market. The crucial feature is that a minimum down payment is required for the purchase of a new home. The model has direct implications for the volatility of house prices, as well as for the correlation between prices and trading volume. The model can also be extended to address the correlation between prices and time-to-sale, as well as certain aspects of the cyclical behavior of housing starts.

We extend Healy (1985) by examining the relation between discretionary accruals and bonus plan bounds for a sample of 102 firms for the 1980–1990 period. Contrary to Healy, we find that when earnings before discretionary accruals fall below the lower bound, managers select income-increasing discretionary accruals (and vice versa). We believe that our results are more consistent with the income smoothing hypothesis than with Healy's bonus hypothesis. However, mechanical selection bias in portfolio formation cannot be entirely ruled out as an alternative explanation for our results.

Robin J. Brenner, Kenneth F. Kroner, Arbitrage, Cointegration, and Testing the Unbiasedness Hypothesis in Financial Markets, The Journal of Financial and Quantitative Analysis, Vol. 30, No. 1 (Mar., 1995), pp. 23-42

[We develop a measurement theory of market integration, based on two notions of "integrated markets." First, two markets cannot be perfectly integrated in any sense if one can construct two portfolios, one from each market, that have identical payoffs but different prices. In that case, the law of one price is violated across the markets. Second, they cannot be integrated in a stronger sense if there are cross-market arbitrage opportunities. Two measures of market integration are developed, respectively reflecting these notions. The smaller the measures, the more closely integrated (in the respective senses) the markets. Among other things, they are interpreted as measuring pricing discrepancy between markets.]

This paper develops a simple time series model of emigration and applies it to data for emigration from the UK, 1870-1913. The model is derived from a microeconomic analysis of the migration decision and provides a specific functional form and dynamic structure. It encompasses and explains many of the empirical findings of earlier research on the determinants of emigration over this historical period. The results support the model strongly in most respects. Both wage rates and employment rates in the sending and in the receiving countries influenced fluctuations in emigration. The short-run fluctuations were driven largely by variations in employment rates while the long-run level of emigration was determined largely by the relative wage. -Author

The literature on contracts predicts that some principals will pay agents rents, that is, amounts larger than those necessary to keep the agent in the contract. We calculated the earnings of the average franchisee in seventy franchise systems in various industries to determine whether rents are paid as a solution to the agency problem in franchise contracts. We found that many but not all systems paid rents, both ex post and ex ante, to the average franchisee. The results confirm those of Kaufmann and Lafontaine (1994), who found rents associated with McDonald's, but the magnitude of rents within the systems we study was generally much lower than those of McDonald's.

Voluntary disclosure, Insider trading, Noncompetitive trading model, Uninformed trader

This paper demonstrates that the behavior of the conventional Phelps-Taylor model of overlapping wage contracts stands in stark contrast with important features of U. S. macro data for inflation and output. In particular, the Phelps-Taylor specification implies far too little inflation persistence. We present a new contracting model, in which agents are concerned with relative real wages, that is data-consistent. In a specification that nests both models, we resoundingly reject the conventional contracting model, but cannot reject the new contracting model.

This paper examines the determinants of hours worked when employment relationships are influenced by risk-sharing considerations. The environment considered is an extension of the standard symmetric-information risk-sharing model that allows for the possibility of enforcement problems on the part of both the employer and the employee. We show that this class of risk-sharing models unambiguously predicts hours to be influenced by wages only through an income effect. Using data from the PSED, we find evidence in favor of this extended version of the risk-sharing model.

In 1991, defense contractor General Dynamics engaged a new management team which adopted an explicit corporate objective of creating shareholder value. The company tied executive compensation to shareholder wealth creation, and subsequently implemented a strategy that included downsizing, restructuring, and exit. Paying large executive cash bonuses amid layoffs ignited controversy. However, by 1993 shareholders realized gains approaching $4.5 billion, representing a dividend-reinvested return of 553%. The study shows how incentives assist in shaping strategy, illustrates the political costs and economic benefits of downsizing and demonstrates that even firms in declining industries have substantial opportunities for value creation.